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The Advantages of Borrowing Money to Start a Business

When starting a business, finding startup capital can be one of the most challenging undertakings someone may face. All businesses need additional cash to make it a reality whether you are just starting out or trying to take your business to the next level. Likewise, small business advisors recommend having at least six months worth of operating capital when calculating start-up expenses.

One of the main options available to most business owners when starting a new venture is borrowing money or also known as debt financing. This method is the use of loans from a number of sources including banks, government agencies, and other lending institutions.

A loan is the most common first set of financing for most small businesses. In fact, studies show that roughly more than half of small- and medium-sized enterprises depend on such funding for expenses such as buying equipment and other tangible assets. Mandatory reimbursement and a fixed rate of interest on the principal amount are the main characteristics of a loan.

Debt financing also has advantages. With this type of financing, you are in control of your own destiny regarding your business. You do not have investors or partners to answer to and you make all the decisions. Most importantly, you own any and all profits you make.